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Getting Real With Real Estate

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Alison Southwick

Fool real estate expert Matt Argersinger of Millionacres.com, a Motley Fool company, joins us to explain how the typical, non-tycoon person can begin to build their property empire…or at least earn attractive returns with tax benefits. Also, Alison discusses the future of where we’ll work.

To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on June 2, 2020.

Alison Southwick: This is Motley Fool Answers. I’m Alison Southwick, and I’m joined as always by Robert Brokamp, personal finance expert here at The Motley Fool. Hey, Bro, how are you doing?

Robert Brokamp: Just fine. How are you, Alison?

Southwick: I’m good. Well, today we’re joined by Matt Argersinger. He works on Millionacres. It’s the Motley Fool sister company focused on real estate. So he’s going to talk about real estate investing, and I’m going to share three ways that the workplace is going to change and what you can do about it. All that and more on this week’s episode of Motley Fool Answers.

Brokamp: So, Alison, what’s up?

Southwick: Well, Bro, I don’t know if you’ve noticed, but we’ve been working from home a lot lately.

Brokamp: Is that what this place is that is surrounding me right now?

Southwick: Yeah, it is. It’s your home, it’s where you live; it’s where you work; it’s where you eat; it’s where you do literally everything.

Brokamp: Educate, clean, eat. Everything.

Southwick: Yeah, everything. And so I want to talk a little bit, because there’s been a lot of stories lately about the way that offices and workplaces are going to change in a postcoronavirus world. I’m going to talk about some of those ways that the office is going to change. Some of them are pretty obvious; and then also what you can do about it. My pro tip, but I’m not really a pro, so I mean, maybe listen to my advice or don’t, I don’t know.

Brokamp: Well, I have no choice. So I’m just going to go ahead and listen.

Southwick: That’s right. All right. So the first way that the office is going to change is you’re going to be working from home more, or you’re at least going to be working with people who are working from home more often. So from Recode, Randy Mola wrote the article “Office Work Will Never Be the Same.” And Randy writes that of the 34% of workers who are estimated to be working from home, many will not go back. A survey of senior finance leaders by the research from Gartner found that 74% of organizations plan to shift employees to remote work permanently. Consulting company Global Workplace Analytics — such a serious name — estimates that when the pandemic is over, 30% of the entire workforce will work from home at least a couple of times a week. Before the pandemic, that number was in the low single digits. And Bro, you used to work from home maybe once a week, like, you aimed for that. So do you anticipate working from home more in the future?

Brokamp: I do, but not permanently. I talked to one of our colleagues today, and he said he’s going to try to arrange it so that he only comes in the office once a week, maybe. I couldn’t do that. I need to get into the office. I need to interact with everyone. I don’t know how you guys feel, but I certainly enjoy recording the podcast in person more than we’re doing it over Zoom. So yes, I will still be coming to the office most of the time.

Southwick: Yeah. I think I’ll still be coming into the office most of the time, too. But I do imagine that I could foresee myself just not coming in more and working from home a little bit more, but not much more, I don’t know. I like being in the office too, anyway.

My pro tip is, if you are planning to work remotely, I recommend tracking down a Wall Street Journal article by Lauren Saunders. It’s titledRemote Working From a Different State? Be Aware of a Tax Surprise.” Taxes when you work remotely can potentially get really tricky. For example, in the article, New York also taxes remote employees who live and work in another state if their job is tied to a New York office. They cited an example of one Arizona resident who has been telecommuting for a New York employer since before the pandemic, and he has owed taxes to both states.

Brokamp: Yikes.

Southwick: So even though work-like tools, which we’ll get to more later, allow us to actually physically yes, you are capable of grabbing your laptop and working from anywhere if you’re used to working in an office, state and local tax laws and other labor laws have not kept up with the idea of a remote workforce. Definitely look into the rules and definitely check in with your employer to find out what’s available.

All right. The next big change coming in a postcoronavirus workplace is more and constant communication. So thanks to tools like Slack and Zoom, we are constantly connected, and now even email is too slow. Have you noticed that? Like, when someone sends you an email from within your company, it’s like, “Agh! Gross.”

Brokamp: Yes, no. And I know if I really want a response to something, I can’t send it over email because it’s secondary.

Southwick: Yeah. I feel like email is where you’re trying to reach out to someone outside of your company, but the idea of sending an internal email, it just feels weird.

Brokamp: On the flip side, I hate Slack. I mean, I think it’s a great tool, but the fact that anyone can interrupt you at any time drives me nuts.

Southwick: Right? Well, guess what? You’re going to hate, hate, hate the world in the future. According to Market Watch, on March 10, Slack hit 10 million simultaneous connected users. That’s up 1 million. So in October 2015, they had 1 million, on March 10, they had 10 million. But less than a week later, they added 1 million users. They added 1 million in one week, starting when coronavirus started and people started working from home and quarantining. Zoom announced that they had 300 million daily meeting participants at the end of April, and that was up from 200 million at the beginning of the month.

So along with these tools comes the increased expectation of being connected and ready to respond at all times, which I know Bro loves. If you’re working from home, you’re probably already feeling this pain, and it’s just going to get worse. You’ve got tools like Trello and Asana and other project-management sort of software. They’re also increasing the speed of how we communicate and get things done from different locations. So what’s my pro tip, Bro?

Brokamp: I have no idea, but I’m waiting. I’m waiting.

Southwick: You’re not going to like it: It’s “embrace the tools.” If you can’t work in the software, you’re going to get left behind. And for you investors out there, as Recode puts it, “Collaboration software moved from a nice to have to a must have.” So if your company is embracing new software and you like it, you should see if you should invest in it, because that’s what we did at The Motley Fool with Slack and Zoom, because we’ve been using Slack for years and Zoom too.

Brokamp: And I own shares of Slack. When I say I hate Slack, I actually think it’s a great application. It’s the constant pinging and craving of your attention that drives me nuts.

Southwick: Yeah. Which leads us to yet another point of how my third and final way of how work is going to change. So yes, we are working more remotely. We’re working from home more, we are expected to stay constantly connected. Experts are also predicting that our days are going to get longer. I know that mine already have. According to productivity software companies, time is limited. I believe they were speaking to Recode on this. The overall number of scheduled meetings went up 7% from February 1 to March 1. The same company also found that meetings got bigger by 18%, which means more people are being invited to the meetings. The good news is that the average length of the meetings went down by about 10 minutes. So that’s nice.

Brokamp: That’s good.

Southwick: They’re shorter, but more people and more of them. Why? Well, probably lots of reasons, but they cite in the article talking to a colleague while grabbing coffee for lunch, for instance, has to be relegated to a more formalized setting. I know I’ve had to do that, right? Been like, “Hey, I haven’t seen you in a while. Would you like to have a Zoom meeting and just talk?” I can’t just say, “You want to go to Starbucks and get a coffee?” Nope.

Brokamp: Nope. If there’s anything that Fools like to do, it’s take a walk and get coffee and talk to somebody. Now that we don’t have that, people are going through withdrawal.

Southwick: I know, I feel weird messaging people and being like, “Hey, I haven’t talked to you in a while. Do you just want to Zoom together?”

Brokamp: What if they say no?

Southwick: No one’s said no to me yet, but it’s so sad there. For a while, at the start of this, I was actually like — Broido and I were talking about something on Slack. Our listeners will know Steve Broido, he produces shows, he’s worked at The Fool for a long time. And we were talking about something over Slack and he’s like, “I’m just going to call you.” I’m like, “What?! Okay.” So there I was on the phone talking to Broido, gabbing as if we’re two middle schoolers. Say like, “Hey, what’s up? Oh my God, you wouldn’t believe it. Blah, blah, blah, blah, blah.” Anyway. So I don’t know. It’s fine, it’s fine. We’re all going to be fine.

All right. So not only do we have more meetings, but we’re working longer hours. A Microsoft study of their global Teams software — I guess that’s what Microsoft offers for collaboration; we don’t use it at the Fool — found that the average time between a person’s first and last usage of Teams grew by more than an hour from the beginning to the end of March. So they’re, I guess, positing that people’s days are growing by at least an hour as a result of working from home.

I also find that working across different time zones adds to your day. It’s not unusual to have a meeting at six o’clock or eight o’clock and it’s like, “What? Oh, that’s right. That’s only three for you.” Or whatever.

So all right. Well, my pro tip is not having a commute means that you are getting some of your day back, but you have to create boundaries for your time and your sanity, Robert Brokamp, such as riding a bicycle and —

Brokamp: Yes, and breathing, apparently.

Southwick: But you did that today, right? We had to reschedule because I was not prepared, and so we taped part of the show and then you’re like, “Hey.” And I was like, “Oh, we’ll tape it later today.” And you’re like, “Well actually, can you tell me exactly when? Because I want to go do this thing.” And that was a very healthy way of you establishing boundaries and making sure that things are clear, because you could have just been like, “Okay, I’ll just sit around and wait to find out when you’re ready.” But no, that was healthy; anyway.

Brokamp: Thank you.

Southwick: And you have to do that. There are a lot of articles out there with advice on how to prioritize your time, not check your phone, but a good starting piece of advice I got was from The Muse. And it was to ask yourself, what’s driving you to stay connected? And are you afraid of dropping the ball and letting your team down? Are you trying to prove yourself or prove to someone else that you’re super productive? And once you sort of answer the questions about why you’re letting yourself get burned out, why are you letting yourself not establish good boundaries, then you can do a better job of learning how to address them, whether it’s changing you or better communicating with your teammates. Anyway, read more about it, just Google it. There’s tons of articles. And that, Bro, is what’s up.

Brokamp: I’m talking about real estate, but I’m not talking about it alone. Fortunately, we have someone here who knows a lot more than I do, and that someone is Matt Argersinger. Welcome to the Motley Fool Answers, Matt.

Matt Argersinger: Happy to be here.

Brokamp: Why don’t you tell us a little bit about yourself, what you’re doing these days, a little bit of your Foolish history, and how you became such a real estate expert.

Argersinger: Sure. Kind words there on the real estate expert part. I’ve been at The Motley Fool for more than 12 years now. And of course I spent most of that time working on a lot of our investing products, our stock-focused products. But at the same time, while I was working at the Fool, my wife and I were spending a lot of time building out a real estate portfolio. We own several rental properties now in Washington, DC. I’ve also done some investing in the commercial real estate world. So I’ve had this kind of parallel track where I’m a stock investor on one side but then a real estate investor on the other side.

I was happy a couple of years ago when we decided to launch Millionacres — Millionacres.com, check it out. It’s our free website on real estate. We’re 100% owned by The Motley Fool, and our mission is basically to help investors invest better through real estate. It’s an amazing asset class. I don’t think a lot of investors know that real estate as a class is about 3 times the size of the stock market. It encompasses trillions of dollars worth of assets between residential properties, commercial properties, nonprofit government properties. And so, billions of square feet, anything from retail shops to houses to office buildings. We cover it all.

Brokamp: So a lot of people, of course, know about real estate. We actually all live in real estate, we’ve seen real estate. Little curious, probably, these days about the current condition of real estate, as we’re all working from home and not traveling to malls, not traveling to hotels. Why don’t we start off a little bit with what’s going on in the real estate market, and has that changed at all your view of investing in it?

Argersinger: Well, it hasn’t changed my view so much of investing in it, but I guess it’s certainly changed my outlook for some parts of real estate. And so, if you think about what’s happened, yeah, we’re all working from home. And so, in a lot of ways, if you’re either a renter or a homeowner, the home has become something actually more important to a lot of us. A lot of us are probably hoping that we had a better home office right now. There’s a dynamic happening on the residential side that’s interesting.

On the commercial real estate side, if you look at what’s happened to retail properties or hospitality properties, think destinations, travel locations, or think about Las Vegas and the big conventions that people are so used to going to with thousands of other people. Well, everything has really ground to a halt there, and so you’ve seen retail shops closed, restaurants closed. You’ve seen hotels, which normally need about 75% occupancy to actually make money, are dealing with about 10% occupancy right now. So in the very short term, it’s been disastrous for a lot of real estate, and I’m seeing a lot of distressed assets, foreclosures, bankruptcies on that side.

And then I think, if you start to look out farther, OK, let’s say we get past the worst of this COVID-19 crisis and the economy is picking back up, restaurants, stores are opening again. What does that say about the behavioral changes that might come about with real estate? Are more of us going to be working from home in the future? Has e-commerce accelerated to the point where now we don’t need as much retail anymore? We’re actually, a lot of us, or more of us are ordering more things online and getting them at home. And is the office — we’re all so used to in previous years spending most of our week at an office from 9 to 5 or more. Is that going to change? A lot of us can be working from home more often during the week, and what does that mean for office real estate? Do we need as much office square footage, especially downtown in cities, as we needed in the past?

And so I tend to think change happens slower than most people think, even though it looks like it’s kind of blowing up in our faces right now. So I expect probably as the economy picks up, we’ll mostly go back to normal, but I think there will be some changes on the margins. And it’s definitely affected how I think about certain parts of the real estate market.

Brokamp: So you talk about things being sold at distressed prices. For some people, they might perk up their ears and be like, “Okay, maybe now is a time to buy.” So let’s start at the basics: why should someone consider being a real estate investor?

Argersinger: Well, I think there’s so many ways. I’ll list a few of my favorites. And by the way, when we talk about real estate investing, I know a lot of us are probably listening and on the panel here are homeowners, I definitely don’t consider a primary home an investment and it shouldn’t be because if you really think about it, it’s a place where we call home. The amount of upkeep we put into it and we’re not necessarily treating it like an investment, even though maybe in the future, we can sell it for profit, and that’s nice. But for one, I think when you look at real estate and investing in real estate, whether that’s owning a rental property, buying commercial assets, or even just investing in real estate investment trusts, which are publicly traded in the stock market, if you look at the track record of real estate, it’s pretty tremendous.

Just looking at real estate investment trusts, which have been around since the ’60s, and these are basically just mutual funds of real estate, if you think about it. The average REIT in the market has over a hundred properties, so it’s a highly diversified portfolio of real estate that you can invest in using your brokerage account. If you look at the performance of REITs going back to the early ’70s, REITs have not only outperformed the stock market on an annual total return basis, so outperform the S&P 500, they’ve actually done so with about 50% of the volatility of the stock market. And so, just looking at REITs, which is the most cheap and cost-effective way to invest in real estate, it’s been a really superior investment over that stretch of time.

And then, I would say the other thing I love about real estate is it’s a real tangible asset, right? We can see what we’re investing in, whether it’s a building or a portfolio of real estate. These are real assets. And these real assets come with steady income, normally. A lot of us who have been renters in the past, we’re used to signing the one-year lease, six-months lease to rent a property. Well, in the commercial world, those leases go from 5, 7, even 10+ years. And so if you think about it, you got a tenant that’s in there signing a lease, that’s going to pay your rent for the next five plus years. And by the way, every year usually, that lease payment is going up by inflation or some other index. And so, very steady income.

And then lower volatility, like I mentioned. And then, layered all around that, which is really probably the most exciting part we can talk about later, is just all the tax benefits you get for being a real estate investor that you don’t necessarily get in the stock market.

Brokamp: Right. So REITs, just to back up what you said, right, it’s so easy. You just go into the market and you just buy a stock or an ETF. I own the Vanguard REIT ETF. REITs have higher yields because they generally distribute more than 90% of their income. Like the Vanguard REIT ETF yields 4.1% nowadays. Besides the lower volatility, it’s not highly correlated to the S&P 500, like a lot of other stocks, so you get a little diversification to it too. So that’s nice and easy.

Once you start moving into the other stuff, it’s certainly a little bit more hassle and a little bit more work. And I would say probably the typical individual doesn’t even think that they can invest in commercial real estate on their own, but that’s not really true. You can do it, right?

Argersinger: You can. Today it’s actually easier than it’s ever been, and that’s related if you go back a bunch of years ago to the Jobs Act and the provisions that came out of that to enable individual investors to invest directly in not just real estate but kind of private investments. And so we’ve had this rise of crowdfunding, and so now a lot of deals you can see in the marketplace, you can invest in a sort of single-asset, institutional-quality real estate that you can invest in from your laptop, just as if you were buying a stock in your brokerage accounts. Over at Millionacres, we’ve recommended several investments, over a dozen investments now. For example, a new apartment complex that’s being built in Chicago, an office building that’s being redeveloped in Atlanta. We actually invested in Nobu, the restaurant Nobu, downtown DC, we own the property there. Nobu is a famous Japanese restaurant, and we get a nice, steady distribution from that restaurant, in addition to getting a percentage of the gross revenue from the restaurant.

So I’m just throwing out some examples, but these are all possible. And you know, more than 10 years ago, you’d have to be wealthy, connected, probably have $250,000, $500,000 to invest in these types of properties. Now you can do it for as little as $10,000. So it’s very easy and very accessible, and it’s getting accessible, more accessible every day.

Brokamp: Since you mentioned them previously, why don’t you touch a little bit on the tax advantages of investing in real estate?

Argersinger: So for a private homeowner, what’s immediately great is that if you own your primary home and you sell it in the marketplace, you can take up to $500,000 in capital gains tax free in that, which is incredible. Just imagine if you could do that in the stock market. You can’t. The other thing that you get, of course, as a primary homeowner is the mortgage interest tax deduction. I know that’s been limited a little bit nowadays with the change in the tax laws and the provisions there, but it’s still out there, it’s still for most homeowners — or not most I should say, but a lot of homeowners — you can still deduct your mortgage interest on your tax bill, which is great.

In the commercial world, it gets even better. So not only do you get a lot of favorable treatments in terms of capital gains, you also get to take advantage of depreciation in a major way. Most assets, you can depreciate a certain amount on an annual basis, and these are really noncash expenses or taking against the value of the property, and what that does is it offsets the income from the property. Then you keep depreciating the asset, keep sort of deferring those taxes on your income until you go to sell much later on. So you’re getting this natural sort of tax sheltering just by owning real estate. Just using my rental properties in DC that I own, for most years, thankfully, my wife and I get a positive cash flow from owning those properties. But most years we also don’t really pay taxes on any profits because oftentimes the cash flow we’re getting is being offset by the depreciation expense. Now, just take that to the commercial world where it’s 10 times that, and you can see the benefits of investing in real estate. They’re really unfair compared to other asset classes.

Brokamp: It is kind of bizarre when you think about it, right? Because you get to take depreciation, because the presumption of that is that the building is, or the house or whatever is depreciating. It’s losing value. But in reality, it’s actually probably going up in value, or it might be going up in value.

Argersinger: Yeah. I’d say most cases, I mean most of the time, depending on the location, of course, you’ve got a property that’s probably at least appreciating by the amount of inflation every year, or the cost of construction, whatever benchmark you want to use. But yeah, the government can tell you now, “Yeah, that’s depreciating. So take that expense off your taxes.”

Brokamp: What about you own these properties in DC, I know on Millionacres, there have been some articles or at least parts of articles talking about vacation homes. So what about buying a vacation home that you can sometimes enjoy, sometimes rent out? I don’t want to name any names, but someone I’m married to loves this idea. I’m a little more skeptical. What do you have to say?

Southwick: Oh, now I see why we’ve had Matt on the show. You’re looking for free financial guidance. I got it. Okay.

Argersinger: No, so the great thing is most of the same benefits you get from owning a primary home actually still apply to your vacation home. So you can actually, if you treat your vacation home as a vacation rental — so let’s say you have a vacation home, maybe use it 60 days out of the year, it’s a beach house, or it’s a ski condo. So you’re using it a bunch of weeks during the year, but maybe you’re renting it out the rest of those weeks. During the period where that vacation rental is rented out, you can treat it basically just like a business. You’re getting rental revenue from people who are staying there, you’re depreciating the asset, you’re taking utility expenses, repairs, maintenance that you have to do, all of that stuff, property management fee. All those are expenses that you can take away from the rental revenue, and that gets factored in your taxes.

So it is — I’m very biased here, but it is a very cost-effective way to own a vacation home, if you’re able to do that and take advantage of it.

Brokamp: So in a couple of days, we’re having our FoolFest at home. Normally we have FoolFest as a big gathering of hundreds of people, but we’re doing it remotely. One of the presentations that I’m helping with, along with Brian Feroldi, is in the FIRE movement, financial independence early. A lot of those folks were able to do it by buying up rental properties while they were working, and they’re able to retire in their thirties or forties because they’re living off the income of these rental properties.

Southwick: You make it sound so easy, but aren’t you also then maintaining all of these rental properties?

Argersinger: No, no, it’s a great point. I think a lot of people underestimate the — I know they’re underestimating the amount of hassle it takes to own a rental property, because I certainly did when my wife and I started buying rental properties. I mean, you have to deal with tenants. You’re inevitably going to have a bad tenant or two or three. You know, sometimes you’re lucky and you’ll have a great tenant. In one of our properties, we had the same tenant for almost three years now. Really have never heard from them that much. They pay the rent on time, they’ve had maybe one issue the entire time they’ve rented the house. We’ve also had tenants where I feel like we’re hearing from them every two weeks on some issue. And yeah, my wife and I have spent our fair amount of weekends fixing plumbing issues, talking to tenants, replacing kitchens. It takes a lot of work.

The nice thing is what we talked about earlier, whether it’s REITs or with some of the crowdfunding investment ideas: you can be a real estate investor and take advantage of a lot of benefits without being the hands-on landlord. It depends on how much time you want to put into it, how much risk you want to take. And if you can determine all those things, there’s just multiple ways to invest in real estate.

Brokamp: Any other downsides we haven’t talked to when you talk about crowdfunding, for example? My first question is how long do I have to lock up my money?

Argersinger: Yeah, that is great. That’s one of the key risks versus, say, investing in REITs. If you’re investing in these crowd funded deals, you’re basically becoming a private equity investor. Your capital is going to go in, at the bare minimum, I’d say, expect your capital to be locked up for at least a3 years, probably 5 years, maybe even 7 to 10 years. Because what you’re doing is you’re buying equity in a property, maybe the property is either being held as a fully occupied property that’s paying out distributions to you, or maybe it’s a property that is in development, or there’s some kind of renovation going on.

So the sponsor or the manager in this case that you’re investing with has a business plan. They’re going to go in, they’re going to renovate this office building let’s say, and in two or three years, they’re going to lease it up, get it back to what they call stabilized, which is maybe 80% occupancy. And then they’re going to look to sell the building. And usually that’s what you’re looking for. So I’m getting my distributions, but I’m really hoping that they sell the building for profit, and I get a profit or a nice return on my investment.

Well, what can happen is imagine if you were trying to sell a building over the last three to four months in the midst of this crisis. Well, not only are you probably unable to sell and not only are you probably getting a little bit of screws tightened on the financing side, but the value of your asset might be down 10% to 15%. Imagine you’re thinking, “Well, you know what, I’m not going to sell the building now. I’m going to wait. Maybe a year from now.” But you got to go out and tell your investors, look, we thought we’re going to sell this building in three years, but now it looks like it’s going to be maybe four years or five years, so your capital’s going to be tied up even longer.

So I think liquidity is the No. 1 initial risk of getting into these deals. But there’s also greater risk of investing in a single asset versus a REIT, which might have a hundred properties. And so, if a REIT runs into problems, it might be because of five or six of its properties that run in trouble. But it still has a huge portfolio of assets to deal with and probably a good amount of access to the financial markets. When you’re dealing with a single asset, if that single asset runs into trouble, you run a high risk of losing all your equity in it. So higher return, but definitely higher risk when it comes to these crowdfunded deals.

Brokamp: So in my Rule Your Retirement Model Portfolios, we have an allocation of 5% to 10% to REITs, depending on where you are along the road to retirement. How do you think in terms of how much someone’s net worth should be allocated to real estate?

Argersinger: I think you got to up that model, Bro. No, I mean, I think if you’re starting out and you don’t know a lot about the asset class, I think 5% to 10% can make sense. I mean, for someone like me, who’s been investing in real estate for almost 15 years, it’s like 50/50 between real estate and stocks. And that’s because I look back at the performance of REITs just as an example. I see the steady returns, the income, the lower volatility, and to me, this is probably a little too aggressive, but I almost feel like REITs could be a good substitute for bonds, or at least half of the bonds maybe. If you say 30% of your portfolio is a fixed income, consider maybe what about half of that to real estate? It’s not as safe, but if I look at it over time, if I look at the volatility, and I look at the steadiness of the returns and the income, it’s actually very similar to bonds, but you’re getting a higher return.

Again, I’m biased. Millionacres.com. There’s a lot — we have tons of articles and content there about this, but if you understand the asset class and have a little more risk tolerance, I could see real estate being 25% to 30% of one’s portfolio pretty easily.

Brokamp: Okay. So someone is convinced, at least intrigued. What’s the first step they should take? Obviously, they should visit Millionacres.com. What else should they do?

Argersinger: I think after that, if you go to Millionacres.com, the other thing there too is we have this great ebook. It’s totally free, and you can download it. I want to say it’s like 40 pages long, very comprehensive on getting started with real estate, various aspects of real estate investing. But I think exactly what you said earlier, Bro, the VNQ, which is a Vanguard Real Estate ETF. If you’re just looking for a very cheap, cost-effective way to get some exposure to real estate, I think the VNQ has been around since 2004, it’s delivered an 8% or 9% annual total return for 16 years, which is pretty good. It gives you that user portfolio instant exposure to a very diversified basket of real estate.

So I’d probably start there, and then maybe once you get comfortable there and you have some more capital, maybe some REITs, get some diversification with some multifamily REITs, industrial REIT, an office REIT. If you’re really risking, maybe a retail REIT or hospitality REIT right now. So maybe build a basket of REITs that you can plan to own for a bunch of years. I think it’ll really pay off.

Brokamp: Well, this has been really helpful. I appreciate you coming on the show. If we end up buying a cabin in the mountains, my wife will thank you very much.

Argersinger: Thank you, Bro.

Southwick: All right. Well, before we go, we’d like to close with some sort of fun diversion, as Bro calls it, like walking or breathing air or just our recommendation for our listeners out there. So, Matt, would you like to go first with your recommendation for this week?

Argersinger: Sure. It’s a little specific to where I live right now. I live on a farm out in rural Virginia, so maybe not everyone can do this, but there is an awesome relief you get when you start chainsawing things. I’ve got the regular chainsaw, right? But then I’ve got the pole saw, which is so that you can get the trees. The short story here is that we have a lot, unfortunately, a lot of dead trees on our property. And so, in the afternoons, on the weekends, going out there and just cutting down some dead trees and cutting them up. It’s been an awesome diversion, and by the way, then we build these big bonfires, and then every week or so we have a big bonfire.

Southwick: That sounds nice.

Brokamp: That’s cool. Are you a fan of splitting wood also? Is that fun with the ax?

Argersinger: Love splitting wood. Got the ax, got the splitter thing, get in there. I’m going to have so much firewood I should probably start giving it away. I’ll come to DC probably when everything opens up in the fall and start just giving people free firewood.

Southwick: Here’s a log.

Rick Engdahl: Sign me up, I’ll buy some.

Brokamp: Yeah, me too.

Argersinger: I’ll bring a whole truckload of firewood to Fool HQ for people to take it.

Brokamp: If it ever opens again.

Argersinger: If it ever opens again.

Southwick: All right. Rick, do you want to go next?

Engdahl: Sure. I was going to say that, if you’re all sitting around with nothing to do, try doing your taxes, because I for one have not done them yet. I’m working on that now, but that’s not fun.

No, I came to the realization that keeping in touch with old friends who are far away, who were your best friends from college or whatever point in life, is just as easy as keeping in touch with your nearby friends. I’ve done some reaching out to old friends, and I recommend everybody to do the same. I sent a random email to a friend of mine. Remember last week I recommended playing Dungeons and Dragons with your kids and stuff? Well, this is the guy who was my high school dungeonmaster, the one who really held us together as a group. I sent him an email just saying, “Hey, I was thinking about you the other day, I’ve been playing some D&D with my kids.” And he sent back this long email that says, “You’ve written just in time. We’ve just embarked on this new campaign, and we have a new character that we need … “

Brokamp: Oh my God.

Engdahl: So basically I’m involved in an online —

Southwick: Wait, he typed his words that way? In the mythical —

Engdahl: Yes, absolutely. I could read you the email, man. It’s totally mythical.

Southwick: Hark, Rick.

Argersinger: Whoa! These many years, Rick.

Brokamp: Forsooth.

Engdahl: Suffice to say, I am very happily reengaged with a bunch of friends from high school whom I hadn’t realized how much I missed. So it’s really fun to be back in touch with old friends. I recommend reaching out to somebody who you think probably doesn’t remember you, because they do. And they’ll be happy to hear from you.

Southwick: Yeah. It’s crazy with those old high school friends, how it’s like no time has passed and you just click right back in with each other. It’s really amazing.

Engdahl: Totally. High school friends, college friends, good past friends. Because you know the old adage that dads don’t have friends, moms have friends and their friends have husbands, you know? So it’s from back in the day, when you really were choosing your own friends. Those friends last.

Brokamp: I think that’s pretty spot-on, to be quite honest.

Southwick: All right. Well, my recommendation this week is fringe sports, and by which I mean, and I’m probably the 12th person that’s told you guys this, but marble races is something that you can watch on YouTube, and they’re amazing and compelling. It’s crazy how you suddenly really, really care about marbles and the competitiveness of marbles going down a track. And apparently, there’s also sports like professional tag, which is very compelling, which you can watch on YouTube as well. And other fringe sports like that. They’re not live, of course, because nothing’s really necessarily going on right now, although marble races, I think they’re about to start a new season here. But it’s not like you don’t already know who won the professional tag from last year. You can go ahead and watch it and get invested in a new “sport.”

Engdahl: Why is it that like classic children’s games, they’re all becoming professional? There’s a new TV show called The Floor Is Lava, where there’s obstacle courses where you can’t touch the floor and you fall in it. It’s like, is it just Gen Xers not letting go of childhood? Is that what’s going on here?

Brokamp: It must be.

Southwick: A national failure to launch millions and millions of people, apparently. All right, Bro. Big, big, closer.

Brokamp: Have you guys heard of drinking water? I’m a big fan. No, I’m just kidding. I will second Matt’s, not the chopping of wood necessarily, but having the bonfire. So my daughter is a senior in high school, very bummed, no prom, no ceremony, nothing. So we had a bonfire in our backyard and invited some of her friends, had some good social distancing with s’mores. She loved it.

And then the other thing I’ll point out is doing the research about the FIRE movement. If some of you have ever done the research, you’d know that a lot of them are actually big bikers. Because one of the things they do is save money by selling the extra car and then they ride their bikes everywhere. Over the last month, I’ve been biking three to four times a week. I’m working up to a 50-mile bike ride up to Harper’s Ferry, West Virginia. My son’s doing as well, so I highly recommend getting on a bike. Mr. Money Mustache is one of the big, big figures in the FIRE movement. He calls biking the essence of life, and I have to agree with him.

Engdahl: You know, the bonfire is a great place to play those new songs that you wrote on the ukulele.

Southwick: All right, everybody. Well, Matt, thank you again for joining us.

Argersinger: You bet, it’s a good time.

Southwick: It’s been great to have you. Please come back. The show is edited habitually by Rick Engdahl. Our email is answers@fool.com. Don’t worry about it, keep going, leave it in, it doesn’t matter. For Robert Brokamp, I’m Allison Southwick. Stay Foolish, everybody.


Alison Southwick has no position in any of the stocks mentioned. Matthew Argersinger has no position in any of the stocks mentioned. Rick Engdahl owns shares of Microsoft and Zoom Video Communications. Robert Brokamp, CFP owns shares of Slack Technologies. The Motley Fool owns shares of and recommends Microsoft, Slack Technologies, and Zoom Video Communications. The Motley Fool recommends Gartner and recommends the following options: long January 2021 $85 calls on Microsof

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